Compute the net present value and the irr for the venture

Assignment Help Finance Basics
Reference no: EM13878367

Uneven Cash Flows, NPV MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolises. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $15 million in year 0. The corporation expects the cash inflows of each new facility in its first year of operation to equal the total cash outlays for the year. Net cash inflows are expected to increase to $1 million in each of years 2 and 3, $2.5 million in year 4, and $3 million in each of years 5 through
10. The lease agreement for the facility will expire at the end of year 10, and MaxiCare expects the cost to close a facility will pretty much exhaust all cash proceeds from the disposal. Cost of capital for MaxiCare is 12 percent.

Required: Compute the net present value (NPV) and the IRR for this venture. What is the break-even selling price for this investment, that is, the price that would yield an NPV of $0?

Reference no: EM13878367

Questions Cloud

Replacement analysis : Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $54,000 per year. The new machine will cost $90,000, and it will have an estim..
At what output level do diminishing returns set in : Consider the information in the production schedule that follows. (a) At what output level do diminishing returns set in?
Manages the global location of facilities in response : How has the company's strategy evolved with respect to global location of facilities?
How many years do these bonds have left until they mature : Shinoda Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.3 percent. The current yield on these bonds is 7.65 percent. How many years do these bonds have left until they mature?
Compute the net present value and the irr for the venture : Compute the net present value (NPV) and the IRR for this venture. What is the break-even selling price for this investment, that is, the price that would yield an NPV of $0?
What is the current price of bond m and bond n : Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $50,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,600 every six months over the subsequent eight years, and ..
Contrast the effects of dividends vs. stock repurchases : Compare and contrast the effects of dividends vs. stock repurchases, the pros and cons of each, and how the managers decide between the two.
Determine the magnitudes of f1 : If the resultant force acting on the bracket is required to be a minimum, determine the magnitudes of F1 and the resultant force. Set F =30°.
How many years will be needed for seattle facility to earn : Will the project be accepted if 15 years' useful life is assumed? What if 12 years of useful life is used? How many years will be needed for the Seattle facility to earn at least a 14 percent return?

Reviews

Write a Review

 

Finance Basics Questions & Answers

  What is the present value of the final

What is the present value of the final $101.75 cash flow (that is 28 years from now). Choice Properties REIT equity is a candidate for a "bond surrogate" because it pays a stable dividend supported by collecting rent on grocery stores.

  Determining the bond valuation

Evaluate the value of a 7 percent, 15-year bond priced to yield 8 percent. (Coupon bonds have a face amount of $1,000 and pay interest semiannually

  How much of the gain is ordinary income

Jess sold a piece of equipment she used in her business. The equipment cost Jess $51,500 several years ago and had accumulated depreciation taken in the amount of $20,300. Jess sold the equipment for $35,000.

  Determine the amount in the acount

You have $2,000 invested in a bank account that pays a 4% nominal annual interest with daily compounding. How much money will you have in the account in 132 days from today?

  Examine the main elements of international trade to find

international trade finance please respond to the followingquestion 1 analyze the major elements of international trade

  What is retained earnings what items increase the balance

what is retained earnings? what items increase the balance in retained earnings? what items decrease the balance in

  Process of calculating the models

Identify and recommend at least 1 credible Web site that discusses the process of calculating the models most commonly used to support capital budgeting decisions, and address at least 3 of the following topics:

  Oberon inc has a 35 million face value 10-year bond issue

oberon inc. has a 35 million face value 10-year bond issue selling for 94 percent of par that pays an annual coupon of

  At an interest rate of 10 percent and using the rule of 72

what is the present value of 150000 to be received 8 years from today if the discount rate is 11 percent. at an

  Would a prohibition of the company selling new shares

After all, any shareholder who wanted to maintain proportionate ownership might simply buy shares in the open market. Would a prohibition of the company selling new shares to its own management accomplish the same goal as preemptive rights?

  What should be the market price of moriband stock

If investors in stocks of companies like Moriband require a rate of return of 17 percent, what should be the market price of Moriband stock?

  Statistics for a households annual cash flow

Calculate the Gross Savings percentage - Statistics for a household''s annual cash flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd